Tenants must consider rent review safety valve

The Tenant Farmers Association (TFA) is encouraging tenant farmers to take urgent advice about serving rent review notices to provide a safety valve in the event of a difficult post Brexit economic landscape for the agricultural industry.

Autumn is one of the traditional times in the year for rents to be reviewed, subject to rent review trigger notices having been served at least 12 months before.

TFA chief executive, George Dunn said “Tenant farmers whose rents have not changed since 2016 and who want to have a rent review in autumn 2019, need to be looking at serving notices now. Although the individual circumstances of each case need to be considered on their own merits, rents properly reviewed or tendered 2 or 3 years ago could end up being too high if any post Brexit economic adjustment causes a drop in farming profitability.”

“For this year’s rent reviews, we are not anticipating much change, particularly where rents were properly reviewed three years ago. Standstills should be the norm in most cases. However, rents not reviewed for some time may still see an increase,” said Mr Dunn.

Tenant farmers are also advised not to consider the rent review date as some form of ‘hard stop’ for negotiations. The statutory rent review provisions state that the review date in each tenancy agreement is only the deadline for the parties to the tenancy to agree the new rent or to trigger some form of formal dispute resolution such as the appointment of an arbitrator.

“Tenants should not feel pressed into settling the rents at unsustainable levels simply because the rent review date is looming. If there is no agreement and no other action by the rent review date, the review simply dies. If one side does seek to invoke a formal dispute procedure, there is still enough time for an agreement to be reached before that procedure gets fully underway,” said Mr Dunn.

The TFA has also sounded a note of caution to individuals bidding on new Farm Business Tenancies (FBTs).

“From time to time we hear of tender rents for FBTs bearing no relationship to the profitability that might reasonably be expected from the sustainable management of the land, even when it is to form part of a larger business. Driven by scarcity, hubris and the economics of the madhouse, these high rents do damage, not just to the individual businesses but to the industry as a whole. Both landlords and tenants must consider the sustainability of the decisions they are taking,” said Mr Dunn.

 

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About The Author

John Swire - Deputy editor of Agronomist and Arable Farmer as well as responsibility for the Agronomist and Arable Farmer and Farm Business websites. After 17 years milking cows on the family farm John started writing about agriculture in 1998 and has since written for a variety of publications and has developed a wide circle of contacts within the industry. When not working John is a season ticket holder at Stoke City and also of late has become a fitness freak, listing cycling, swimming and walking as his exercises of choice.